As the post-election rally boosted U.S. stock markets, that in turn brought nearly $50 billion in new assets to U.S.-listed ETFs, with nearly all of that going to equity ETFs.
U.S. equity funds, led by the likes of the SPDR S&P 500 ETF Trust (SPY), the iShares Russell 2000 ETF (IWM) and the Financial Select Sector SPDR Fund (XLF), raked in $49 billion in fresh net assets last month. These three ETFs alone—the top three most popular funds—snagged nearly $20 billion of that total.
November’s asset flows put 2016’s total ETF creations at nearly $224 billion, outpacing creations by this time last year, which totaled just over $201 billion by last November. It also puts the ETF market on track to beat 2014’s asset intake record of $243 billion.
The only fixed-income ETF among the top monthly gainers was the iShares TIPS Bond ETF (TIP), attracting $2.1 billion in net assets—an 11% jump in total AUM, which spoke to investor confidence in the outlook for economic expansion, and for a rise in inflation.
Gold & Emerging Markets Fall Out Of Favor
The iShares MSCI Emerging Markets ETF (EEM) lost roughly 12% of its total assets, with net redemptions reaching $3.54 billion, which was another reaction to the election. There are many questions about what Donald Trump’s trade policies will be, and how they’ll impact emerging markets and the U.S. dollar.
The SPDR Gold Trust (GLD) and the iShares Gold Trust (IAU) lost a combined $3.4 billion in November as the dollar strengthened and Treasury yields surged higher, both of which weakens the appeal for gold ETFs. So far this year, the gold trade had been one of the most popular safety plays, but in November, it was all about equities, as the market reacted to a president-elect who is expected to promote fiscal stimulus and market-friendly policies.
New Leveraged Oil ETN Coming
Credit Suisse recently announced the de facto closure of the VelocityShares 3x and -3x oil funds, the VelocityShares 3x Long Crude Oil ETN (UWTI) and the VelocityShares 3X Inverse Crude Oil ETN (DWTI), two rather popular exchange-traded notes with $1 billion and $246 million in AUM, respectively.
And while there are some options to these two ETNs on the market, none of them offer 3x leveraged on oil futures like UWTI and DWTI. But it hasn’t taken long for an issuer to fill the void. US Commodity Funds has filed for a United States 3x Oil Fund.
USCF already runs the most popular crude oil ETF in the land, the United States Oil Fund (USO), with over $3.4 billion in assets.
Perhaps the most curious thing about this filing is that it’s only for a 3x daily leveraged fund—the equivalent of UWTI. On the one hand, this makes sense, since UWTI is the fund that had the most assets. But on the other hand, there’s really no difference between being a buyer and a seller of a futures contract. An inverse version of this new fund would essentially look exactly like this one, but for a few minus signs and a sentence or two of language.
PowerShares rolled out two new ETFs that serve as complements to the firm’s $2.7 billion PowerShares S&P 500 High Dividend Low Volatility Portfolio (SPHD), which launched in October 2012. The PowerShares S&P International Developed High Dividend Low Volatility Portfolio (IDHD) and the PowerShares S&P SmallCap High Dividend Low Volatility Portfolio (XSHD) both come with expense ratios of 0.30%.
IDHD’s index is derived from the S&P EPAC Ex-Korea Index. The methodology first selects the 300 highest-yielding ETFs over the past one-year period from the broad index, and from that, selects the 100 stocks with the lowest volatility over the preceding one-year period. Constituents are weighted by their dividend yield, with weighting constraints at the sector and country levels to ensure diversification. XSHD’s index is derived from the S&P SmallCap 600 Index and uses a similar approach. However, it ultimately only includes 60 securities. Sector weights are capped at 25% for the sake of diversification.
iShares launched a fund that will target companies that are acceptable under certain socially responsible standards and seek to optimize its exposure to those standards. The iShares MSCI USA ESG Optimized ETF (ESGU) comes with an expense ratio of 0.28% and tracks the MSCI USA ESG Focus Index, which is derived from the cap-weighted broad MSCI USA Index. The methodology mainly screens the parent index to exclude tobacco, weapons and high-controversy names, and then uses an optimization process to maximize its exposure to companies with favorable ESG ratings. Companies are evaluated based on their exposure to ESG-related risks and opportunities relative to their peers within their industry.
Drew Voros can be reached at email@example.com.
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